ACAMS Updated CAMS Exam Questions and Answers by dhruv

Verified Answer: = A. Collect further customer reference data and determine what must be screened and at which frequency. and C. Deploy an independent risk-based test to ensure the screening on this customer is effective.

Comprehensive Detailed Explanation: = When an existing customer changes its business scope and jurisdictions, banks need to manage sanctions compliance risk effectively. Here are the steps they should take:

1. Collect Further Customer Reference Data: Obtain updated information about the customer’s new business activities, locations, and counterparties. Understand the nature of their transactions and assess the associated risks. Determine what specific data elements need to be screened (e.g., names, addresses, beneficial owners) and establish the appropriate screening frequency.

2. Deploy an Independent Risk-Based Test: Conduct a comprehensive risk assessment tailored to the customer’s changes. This assessment should consider factors such as the customer’s industry, geographic exposure, and transaction volume. The risk assessment helps identify high-risk areas that require enhanced scrutiny.

3. Screen Directors and Ultimate Beneficial Owners: Perform sanctions screening not only on the customer but also on their directors and ultimate beneficial owners. This ensures that any potential risks associated with these individuals are identified and mitigated.

4. Perform Politically Exposed Person (PEP) and Negative Media Screenings: Continue to screen the customer and related parties against PEP lists and negative media sources. This helps detect any adverse information related to politically exposed individuals or entities.

By following these steps, banks can proactively manage sanctions compliance risk and safeguard their institution’s reputation while adhering to regulatory requirements12.

When investigating unusual transactions, financial institutions must focus on data-driven risk assessment and internal review first.

Option A (Correct):Assessing business ownership and control structureshelps determine ifmultiple businesses are connected through hidden links(e.g., shell companies or common ownership).

Option C (Correct):The account managermay provide valuable insight on whether the customer’s activity aligns with their expected profile.

Option B (Incorrect):Law enforcement should only be contacted after internal review confirms suspicious activity.

Option D (Incorrect):Declining transactions without thorough investigationcould lead tomissed SAR filingsor improper risk assessment.

Option E (Incorrect):Social media is not a reliable investigative toolfor AML casework.

Key Red Flags in Business AML Investigations:

Frequent transactions between businesses with no clear commercial relationship.

Ownership structures that obscure beneficial owners.

Rapid movement of funds through multiple accounts without economic justification.

Best Practices for Investigating Complex Cases:

Verify ownership and control through official company registries.

Conduct negative news screening and PEP/sanctions screening.

Request supporting documentation from the customer.

When a high volume of incoming wire transfers generates an alert about a client and the funds are immediately debited by cash withdrawals and outgoing wire transfers, the first information that should be reviewed to investigate this alert/case is the customer’s account activity. This is because the account activity can reveal the origin, destination, purpose, frequency, and amount of the wire transfers, as well as any unusual or inconsistent patterns that may indicate money laundering or fraud. The account activity can also help to compare the wire transfers with the customer’s profile, risk rating, expected behavior, and source of funds. Reviewing the account activity can help to determine if the alert is a false positive or a true positive, and if further investigation or reporting is required.

Fraud and financial crime are often associated withsudden resignations, attempts to evade scrutiny, and financial behaviors inconsistent with legitimate income.

Option A (Correct):Being evasive about past employment suggests potential undisclosed misconduct.

Option D (Correct):Living beyond one’s means is a major financial crime red flag, indicating possible fraud or illicit earnings.

Why Other Options Are Incorrect:

Option B (Incorrect):Nationality alone does not indicate fraud risk.

Option C (Incorrect):Having friends in high-risk industries is not necessarily a direct red flag.

Common Red Flags for Employee-Related Financial Crime:

Reluctance to take vacations or change roles (attempting to conceal wrongdoing).

Sudden resignation or disappearance following internal investigations.

Unusual financial activity, including large unexplained deposits.

Best Practices for Fraud Prevention in Corporations:

Regularly monitor employees in high-risk roles (e.g., finance, procurement).

Use whistleblower channels to detect internal misconduct.

Conduct thorough background checks before hiring employees.